CHAPTER ONE

INTRODUCTION

1.1 Introduction
Local government finance is one of the aspects of public finance. It deals with
the generation of revenue, expenditure and utilization of financial resources in
order to bring the impact of government closer to the people at the grassroots.
Put differently, finance is essential at enabling local governments transform
the lives of the rural dwellers through the provision of social services and rural
infrastructures like the construction and maintenance of rural roads, markets,
schools, health centers, etc.
Finance is the heart of the major activities of government. Government units at
all levels-national, State and Local are daily engaged in the production and
distribution of public goods and services in areas such as agricultural
extension, education, healthcare, social welfare, security, all of which involve
huge amounts of money. The mobilization of the financial resources or
revenue to meet the diverse welfare needs of the people has in effect become
an important responsibility which governmental authorities have to shoulder.
This responsibility not only includes the generation of revenue but also its
allocation among competing needs of the local governments. It is within this
context that we can appreciate the task of revenue collection at local
government level (Abubakar, 1999).

Generally speaking, revenue accruing to any tier of government may be

classified as recurrent or capital. While the former is generated on day-to-day
basis throughout the year, the latter arises once in a while and in a larger
proportion. They are also described as internal and external sources of revenue
respectively. Barber (1978) remarked that the principal sources of local
government revenue are local rates, federal government grants and trading
receipts. The 1976 Local Government Reforms (in Nigeria) recognized the
fact that if meaningful local government is to be expected in Nigeria, much
larger financial resources are needed. The internal sources of revenue
comprise many major and miscellaneous items aggregated to provide the
required fund for financing the enormous functions ascribed to Local
Governments as third tier of Government, Orewa and Adewumi (1983) stated
that one of the main reasons why a local council exists is to collect various
forms of revenues from its citizens and to use these to provide social services
in an efficient manner as possible. These sources are summarized into the
following revenue heads: Tenement rate/property rating, local license, fines
and fees, earnings from commercial undertakings and rent on property,
interest payment, and dividends and miscellaneous (Orewa and
Adewumi,1983).

In the 1976 Local Government Reforms, the Federal Republic of Nigeria

articulated four basic objectives for establishing local government. These are:

i. To make appropriate services and development activities

responsive to local wishes and initiatives by developing or delegating such
services to local representatives bodies.

ii. To facilitate and bring the exercise of democratic self-employment

close to the local level of our society and to encourage initiative and
leadership potentials.

iii. To mobilize human and material resources through the

involvement of members of the public in their local government, and

iv. To provide a two-way channel of communication between local

communities (both state and federal) (Fajobi, 2010:3).
For local government to perform these enumerated functions, it has a history
of revenue allocation in Nigeria. Prior to 1979 constitution local governments
were given occasional grants for the funding of health and primary education.

1.2 Statement of the Problem

Nigeria operates a federal system of government where power is

constitutionally shared between three tiers of government. Local government
was created as a means of promoting development and bringing government
closer to the people.

Nigeria's experience in local government administration, whether in military

regimes or in democratic era has clearly shown that local governments are
faced with daunting challenges in their mandate to promote development and
provide essential services to the rural dwellers. Local government, which is
statutorily established to be the closest tier of government to the people, is not
doing its bidding coupled with the fact that resident population in the local
government has no significant access to the benefits of its existence. The
failure of the local governments in the area of Expenditure pattern has made
the citizens to lose their trust in government as an institution. In some areas,
council officials are better known for the harassment of citizens than
Expenditure pattern (Ajibulu, 2011). It is common knowledge that local
government has the weakest capacity to initiate and manage rural development
programme. Most of the officials are performing their functions without the
relevant qualification to perform effectively. As a result, the available
resources for accelerated and sustainable rural development are inefficiently
utilized for the purpose intended (Ocheni. et al. 2012:131).
In spite of the increase in total amount of funds available to Local
Governments from early 1990s to date, their economic and financial profile
have been very poor, relative to its development due perhaps to false
declarations of statements of revenue by revenue collector‘s and treasury staff,
political instability and lack of socio-political philosophy among others.
Mope, (2015) argued that in nominal terms, the allocation which stood at
N597.2 billion in 2005 jumped to N1, 379 billion in 2008, reflecting a
marginal revenue increase of 130.9%. However, some challenges which
served as impediments to Local Governments‘ efforts to generate adequate
revenue from various sources. Many factors have been identified to be
responsible for the inadequate internal revenue effort. Chief amongst them are
corruption and weak machinery for check and balances in the generation of
revenues. Preliminary survey has shown that the inability of the local
governments to provide adequate services to the people within their areas of
jurisdiction is attributed largely to inadequate revenues. The researcher was
therefore motivated to conduct research in order to investigate the impact of
local government revenue on Expenditure pattern in Ado-Odo, Ota Local
Government Areas.

1.3 Objectives of the Study

i) To determine the general level of revenue generation in Ado-Odo,

Ota Local Government Areas;

ii) To examine the relationship between revenue generation and

Expenditure pattern in Ado-Odo, Ota Local Government Areas;

iii) To determine the extent to which revenue affects Expenditure

pattern in Ado-Odo, Ota Local Government Areas;
 iv) To examine the effectiveness of revenue management in Ado-Odo
Ado-Odo Local Government.

v) To identify the challenges of revenue generation and Expenditure

pattern in Ado-Odo, Ota Local Government Areas.

1.4 Research Questions

The study seeks to answer the following research questions:
i) What is the level of revenue generation in Ado-Odo, Ota Local
Government Areas?

ii) What is the relationship between revenue generation and Expenditure

pattern in Ado-Odo, Ota Local Government Areas?

iii) To what extent does revenue affect Expenditure pattern in Ado-Odo, Ota
Local Governments Areas?

iv) How effective is revenue management in Ado-Odo, Ota Local

Government?

v) What are the challenges of revenue generation and Expenditure pattern in

Ado-Odo, Ota Local Government Areas?

1.5 Research Hypotheses

H0: The amount of revenue generated by the local government has no

significant relationship with the level of Expenditure pattern in Ado-Odo, Ota
Local Government Areas.
H1: Effective management of local government revenue does not affect the
performance of local government in Expenditure pattern.

1.6 Significance of the Study

Previous studies like that of Jumare, (2008) focused on statutory allocation to

local government and Expenditure pattern and Youbi (2008) associated the
failure of Expenditure pattern by local government functionaries with bad
local politics. This study focused on the two sources of local government
revenue and Expenditure pattern.

The study provided the basis for developing various ways of improving
revenue generation in Ado-Odo, Ota Local Governments Areas and in other
local governments‘ areas in Nigerian. With an improved revenue generation,
Ado-Odo, Ota Local Governments will be able to meet the demands of the
people and will be able to perform their primary functions of provision of
essential services more efficiently. The study also revealed the extent to which
an improved revenue generation will impact on development generally. The
study is an added contribution to the existing knowledge on revenue and
Expenditure pattern in Local Government and ways of improving the two. The
research will also help other researchers who may wish to carry out research
of similar nature.

1.7 Scope of the Study

This dissertation focused on the study of local government revenue and

Expenditure pattern in Ado-Odo, Ota Local Government Areas of Ogun State.
The scope of the study is restricted to a period of seven (7) years i.e. (2007-
2013).
1.8 Limitations of the Study

As with any other research, there were restrictions or constraints that the
researcher encountered. The limitations of this study include:
i. Financial constraint:

It is an established fact that every research work consumes a lot of money.

Therefore, the financial requirement for gathering data, typing of the project
subsequently and other related expenditure served as a major constraint to this
research work.

ii. Responses while gathering data

For some reasons best known to the officials of the Local Government, the
authorities were not willing to release some information which is relevant to
this research project, even after persuasion and being assured that the
information sought will only be used for academic purposes alone. This
refusal to release some vital information by the Local Government was as a
major constraint to this research work.

1.9 Definition of Terms

From our analysis of the statement of the problem and hypotheses stated
above, there are some key concepts that need to be conceptually defined for
better understanding. These concepts include: Local Government Finance,
Financial Management, Revenue Generation, IGR, Development, Expenditure
pattern and Local Government.
Impact
Impact in this study refers to the effect of revenue generated on Expenditure
pattern by local government. It also determined the extent to which local
government was able to deliver local services with resources at its disposal.

Local Government

Local Government is defined as Government at the local level exercised

through representative council established by law to exercise specific powers
within defined areas. These powers should give the council substantial control
over local affairs (including staffing) and institutional and financial powers to
initiate and direct the provision of services and to determine and implement
projects so as to complement the activities of the state, and Federal
Government in their areas, and ensure, through the active participation of the
people and their traditional institutions, that local initiative and response to
local needs and conditions are maximized (Federal Republic of Nigeria,
1976).

Expenditure pattern

According to this research, Expenditure pattern refers to all the goods and
services delivered by the local government in responses to the public needs in
order to address societal problems. The services here include provision of
schools facilities like books and chairs; hospital facilities like beds and drugs;
agriculture, farm inputs and machines like tractors, fertilizers and seeds.
Financial Management

Financial management is defined as the act of total management function

concerned with the effective and efficient raising and use of funds. As
processes and responsibility, financial management consists of decision
making regarding the following major activities among others.

1. Determination of funds requirement of the organization revenue

generation and mobilization.

2. Seeking and obtaining the right amount of funds at the right time
for cash flow management

3. Deploying available funds to the needs of the organization revenue

application and control, and

4. Giving proper stewardship for funds obtained and utilized

(Abubakar, 1999).

Revenue
According to 1999 constitution, revenue is defined as any income or returns
accruing to or derived by the government from any source and include any
receipt however described arising from the operation of any law, and receipt
however, described from or in respect of any property held by government,
and any returns by way of interest or loans and dividends in respect of shares
or interest held by government in any company or statutory body. However,
revenue can also be regarded or referred to as tolls, taxes, rates, fees, royalties,
rents and other receipts of government from whatever sources such as
proceeds from loans given out (Section 162(10) of 1999 Constitution).
 CHAPTER TWO
LITERATURE REVIEW

2.1 Introduction

In this chapter the study reviewed the relevant literature in the area of study,
i.e. revenue and service delivery and finally provided Fiscal Federalism
theory as a theoretical framework upon which our study is based. The key
areas covered in our literature review include; local government and finance,
revenue, source of revenue, development, the concept of socio-
economic development and the role of local government in the
development process.

Finance is the backbone of any organization more so when such organization

is saddled with responsibilities for the design, promotion and administration of
socio-economic development at the grass roots level and the provision of a
wide ranging number of service and infrastructural support in such areas like
primary education, basic health care and social welfare among others, which
have since the 1976 Local Government reforms formed the bedrock of local
government function and responsibilities in Nigeria. It follows, therefore, the
extent to which a local government council is able to perform its statutory
functions and discharge its responsibilities would depend very much on the
amount of resources at disposal. (Local Government Reforms, 1976).

2.2 Conceptual Framework of Local Government

The concept of local governance is as old as the history of humanity, only

recently has it entered the broad discourse in the academic and practical
literature (Shah, 2006). This concept has created excitement
within the scholarship and practicing world of administration. It has
attracted the attention of many scholars within the academia who have
seriously analyzed and dug deep into the meaning, genesis and the need for its
existence within all political arrangement of the world (Akindele. et al.1997).
Therefore, there is no unanimous acceptable definition among the scholars on
the definition of local Government.

The term local government has been defined variously by different scholars.
In the view of a scholar like Wraith, local government refers to locally elected
councils whose main purpose is to provide or administer services with as great
degree of independence as modern circumstance allow (Wraith, 1964. For
Golding, local government is the management of their own affairs by the
people of their locality (Golding, 1959).

local government can be defined as thus:

A specific institutions or entities created by national constitutions (Brazil,

Denmark. France. India, Italy, Japan. Sweden), by state constitutions
(Australia, the United States), by ordinary legislation of a higher level of
central government (New Zealand, the United Kingdom, most countries), or
by executive order (China) to deliver a range of specific services to a
relatively small geo-graphically delineated area. Local governance is a broader
concept and is defined as the formulation and execution of collective action at
the local level. Thus, it encompasses the direct and indirect roles of formal
institutions of local government and government hierarchies, as well as the
roles of informal norms, networks, community organizations, and
neighborhood associations in pursuing collective action by defining the
framework for citizen-citizen and citizen-state interactions, collective decision
making, and delivery of local public services. Local governance, therefore,
includes the diverse objectives of vibrant, living, working, and
environmentally preserved self-governing communities.
The above definitions seem to have presented a comprehensive definition and
description of the concept of local government from the perspectives of
different parts of the world. However, the definition has not given a clear-cut
definition of local government to reflect Nigerian situation. To address this
problem therefore (Akindele et al, 2000) defines local government
down to earth to reflect Nigerian local government system
when he maintains.

The Nigeria 1976 Guideline for Local Government Reform define local
government as:

Government at the local level exercised through representative council

established by law to exercise powers within defined areas. These powers
should give the council substantial control over local affairs (including
staffing) and institutional and financial powers to initiate and to determine and
implement projects so as to compliment the activities of the state and federal
government in their areas, and ensure, through devolution of functions to those
councils and through the active participation of the people and their traditional
institutions, that local initiative and response to local needs and conditions are
maximized (Akindele et al, 2000:67).

A more comprehensive definition of local government is therefore provided as

the government at local/grassroots level created by law with the power to
generate revenue through taxation and to provide social/public goods and
services to the local population. These governments (local governments) are
governed by democratically elected representatives and are independent and
autonomous from federal and state governments (Ajayi, 2011) The above two
description of local government in Nigeria seem to be done in absolute terms,
they tend to produce a generalised negative perceptions for all local
governments in Nigeria. In essence, these definitions were not fair and tend to
relegate local governments to square one.
2.3 Expenditure pattern

Joseph, (2014) sees services as the services as goods and social outputs that
people in a community wish to obtain for the common good, such as a livable
environment, clean water, good education, health care, security, and so on.
(Jung, 1997). These services in the words of Joseph, (2014) include, water
supply, sewerage collection and disposal, refuse removal, electricity and gas
supply, municipal health services, municipal roads and storm water drainage,
street lighting, municipal parks and recreation. In this regard, the service to be
provided by local government in Nigerian are stated in the fourth schedule of
the Constitution of the Federal Republic of Nigeria.

Joseph also added that, services have a direct and immediate effect on the
quality of the lives of the people in that community. For example, if the water
that is provided is of a poor quality or refuse is not collected regularly, it will
contribute to the creation of unhealthy and unsafe living environments. Poor
services can also make it difficult to attract business or industry to an area and
will limit job opportunities for residents.

According to Kadiresan (2009), Expenditure pattern refers to the goods and

services which the government both federal, state and local government
provide to the general public in which the consumption of which depends not
on consumers‘ income, but only on the need of the public. This definition says
a lot about Expenditure pattern. However, it concluded that Expenditure
pattern reflects solely the public needs. This could not be true in real sense,
especially in our situation in Nigeria where social services are produced
mainly to address political issues and not really address social/public
problem(s). in fact, politics determine who gets what and how and why?
Thus from the above discussion, there is need for local governments to
provide sufficient information concerning Expenditure pattern to the residents.
In a budget, Expenditure pattern can be strengthened through a number of
ways:

 Improved Expenditure pattern

 Strengthened governance and accountability. (Ekpo, 1990).

However, (Zola, 1997) notes that despite the government‘s determination and
commitment, some of their expectations will take long time to be realised
because we have to live in the resources that our country can afford. Tax
evasion and avoidance is also explained by (Snavely, 1998) that compliance
for locals to pay taxes to finance Expenditure pattern requires sending
messages in the media tracing the benefits of compliance.

According to (Abigaba, 1996) the decentralisation of local authorities had a

loophole in the revenue collection and efficiency of Expenditure pattern. This
was due to the fact that laws were not clear as to times at who should collect
revenues and to whom to offer the services, the poor accounting system,
untrained personnel and politicians all affected the performance of local
authorities. This is in agreement with (Babiiha, 2002) who noted that the sub-
counties in Ntungamo district give water programmes a less priority thus
giving minimal funding hindering construction of new and rehabilitation of
old safe and communal water resources.

2.3.1 Expenditure pattern at Local Government

Expenditure pattern refers to the provision of social or public goods that will
promote socio-economic wellbeing of the citizens.
Public services offered by government are numerous and may
include the provision of public utilities, security, economic development
projects, and the enforcement of the law and so on. The delivery of
public goods and services at the local government level or the grass root is
aimed at moving the standard of living of the populace to the next level
(Angahar, 2013).

Consequently, the efficient and effective provisions of basic amenities

and social infrastructures for the people at the grass root are key factors to the
existence of any government (Bolatito & Ibrahim, 2014). In sequel to the
above, the Nigerian constitution assigns Expenditure pattern responsibilities
to the three tiers of government with states and local government playing the
most significant role in the delivery of basic services. Some of the services
expected form local government authority include education, health, housing,
water, rural electricity, waste disposal services, roads, transport, and so
on (Adeyemi, 2013; Agba, Akwara, & Idu, 2013). Thus local
government councils are required to serve the public interest in areas of
constructing roads, public markets, healthcare centres, drainages,
transportation, motor parks, building primary schools, among others (Bolatito
& Ibrahim, 2014).

In support of this position, Agba, Akwara, & Idu (2013) contends that as
agents of rural development, local governments are to use funds made
available to them by both federal and state governments and their internally
generated revenue to improve on the lives of the people within their areas of
operations through initiating and attracting developmental projects to the local
government such as provision of access roads, water and rural electricity.
Apart from being available political and administrative organ for the
transformation of rural communities, local governments also act as the training
ground for the breeding of the grassroots democracy fundamental in national
development (Adeyemo, 1995; Lawal and Oladunjoye, 2010).
2.4 The Role and Challenges of Local Government Towards
Expenditure pattern in Nigeria

Nigeria is the most populous country in Africa, with a population of 140

million
(Amakom, 2009), 64 percent of whom live in rural areas. In the pursuit of
development at the grassroots, local government was created to provide level
of pleasurable services to rural dwellers. Ola (1984), in Nigeria, local
government is the third tier of government whose major responsibility is to
provide commensurate services to the rural dwellers.
Everywhere in the world, irrespective of the system of government, local
government is created to ensure efficient services at local level.

Local government as an agent of development is to use the fund made

available to them by both central and state government and the internally
generated revenue (IGR) to improve on the live of the people at the grassroots
within the local government council's area of operation by initiating and
attracting developmental projects to the local councils such as provision of
access roads, water, and rural electricity: communal services such as the
construction of roads, bridges, and personal welfare in such area as education,
housing, and health care Expenditure pattern system. (Ola, 1984).

In line with the above, the 1976 Nigerian Local Government Reform
Guidelines stated the principal aims of local (government as follows:

a) To make appropriate services and development activities

responsible to local wishes and initiatives by developing or
delegating them to local representatives bodies:
 b) To facilitate the exercise of democratic self government close to
the local levels of our society, and to encourage initiative and
leadership potential;

c) To mobilize human and material resources through the

involvement of members of the public in their local development;

d) To provide a two-way channel of communication between local

communities and government (both state and federal).

From the objectives above, one of the major reasons for creating local
government is to provide services using human and financial resources at its
disposal to facilitate development at the grassroots.

Local government is the lowest in the governmental hierarchy within the

concept of federalism. The federal government is the sovereign national, the
state government, a quasi-sovereign and local government infra-sovereign,
subordinate and subject to the control of the state government; yet it is a
separate legal unit being a body corporate having a common seal, with powers
to sue and to be sued, mainly providing obligatory municipal services
(Samihah and Adelabu. 2011).

2.6 Theoretical Framework

2.6.1 Fiscal Decentralization

Fiscal decentralization comprises the financial aspects of devolution to

regional and local government. It is the fashionable term; the alternative
description central-local (or intergovernmental) fiscal relations and fiscal
federalism‖ are often used.
According to Davey (2003) fiscal decentralization theory covers two
interrelated issues. The first is the division of spending responsibilities and
revenue sources between levels of government (national, regional, local etc).
The second issue is the amount of discretion given to regional and local
governments to determine their expenditures and revenues (both in aggregate
and detail).

These combined dimensions have a significant impact on the reality of

decentralization in its broader political and administrative sense. How much
power and responsibility regional and local governments actually exercise
depends substantially on;

i) What range of public services they finance

ii) Whether their revenues are commensurate with these

responsibilities

iii) How much real choice they have in allocating their budget to
individual services

iv) Whether they can determine the rates of their taxes and charges
(both allowing them to vary their spending level and making
them answerable to the taxpayers).

2.6.2 The Benefit Received Theory of Taxation

This theory holds that the taxes which an agent pays should be commensurate
to the benefit that he receives from the mix of goods and services supplied by
the state (Blum and Kalven, 1953).
The theoretical framework in the benefit received principle or expenditure
revenue principle does not include the specification of a single fiscal system to
be used as a point of analysis into the governmental activities and their
possible impact on the taxable capacity of different tiers of government. In
other words, the framework does not however enable the fiscal specialist to
indicate the alternate distribution of tax burdens and public expenditures
which will yield the desired result. Emphases should be geared towards at the
analysis of government mandatory responsible for such expenditures and taxes
decision making (Jumare, 1994). In this study, the theory explains that tax
payers paid tax to government only when they know that government will
provide them something in return in form of Expenditure pattern (as a quid
pro-quo). Therefore, the ability of government to raise revenue is dependent
on its capacity to provide the basic services to the people. Therefore, the
government should try as much as possible to provide more social services to
the tax payers who will in turn, be motivated towards paying more taxes.
 CHAPTER THREE
RESEARCH METHODOLOGY

3.1 Introduction
This chapter focuses on the methodology of the study. This consist of methods
and approaches used, justification of the methods, instrument/tools used,
population sampling and size, sampling procedure employed, justification for
sample selection procedure and statistical techniques used in the research
analysis.

3.2 Research Design

The research employed the use of both quantitative and qualitative analysis.
Quantitatively, survey research method is used; on the other hand content
analysis of the estimates of the two local governments has been made.

3.3 Population and Sample Size

Based on the 2006 population census figures, Ado-Odo Local Government

Area has a total population figure of 291,358 while Ado-Odo Local
Government Area has a total population figure of 138,956. In terms of staff,
Ado-Odo Local Government has a total of 1400 staff out of which 150 are
staff of the finance department, while Ado-Odo Local Government has a total
workforce of 776 staff out of which 98 are staff of the finance department.
Both categories of the population would be used as our population size from
which our total sample size would be determined. Twenty percent (20%) of
the finance staff of each Local Government would be used as the sample size
of the study.
The total population of the two local governments is 291,358 for Ado-Odo
local government and 138,956 for Ado-Odo Local Government, we shall
determine our sample size using the Yamani‘s Formula as follows;
N
n= 1 + N (e)2
Where; n = Sample size

N = Population Size

e= Sampling Error or degree of precision.

Source; Charles,T.C. &Lawrence, L.S (1989).

If we take our sampling error to be 5% (0.05), we will have our sample as

thus;

For Ado-Odo local government:

291,358
n=
1 + 291,358 (0.05)2
n= 291,358
1 + 291,358 (0.0025)

n= 291,358
1 + 728.395
n=
291,358
n =399.5 729.395
Therefore, the approximately sample size of Ado-Odo is 400;

For Ado-Odo local government:

 n= 138,956
1 + 138,956 (0.05)2
n= 138,956
1 + 138,956 (0.0025)

n= 138,956
1 + 347.39

n=
138,956
348.39

n =398.85

Therefore, the approximate sample size of Ado-Odo local government is 399.

However, in each category 10% of the sample size was added to the minimum
sample sizes determined using the Yamani formula. Therefore, the following
table presents the sample sizes of each of the selected Local Government
Areas:
Local government Sample Size
Staff Beneficiary Members
Ado-Odo 30 440
Ado-Odo 20 439
Total 50 879
Source: Researcher‘s Survey, 2014.

The above table represents the sample size of the staff and beneficiaries in the
studied areas. Ado-Odo Local Government has a staff sample size of 30 and
440 beneficiaries. On the other hand, Ado-Odo Local Government has a
sample size of 20 staff and 439 beneficiaries.

Thus, our total sample size of the staff (finance) is fifty (50) i.e 30 + 20
In terms of beneficiaries, forty (40) beneficiaries would be selected in each of
the 11 wards of the Ado-Odo Local Government Area, while forty four (44)
beneficiaries would be selected in each of 10 wards of the Ado-Odo Local
Government Area. Therefore, the total community members of 880 constitute
the sample size of the community members. In all, a sample size of 930 i.e (50
+ 215) was adapted as the sample size of the study.

3.4 Sampling Methods

A multi-stage sampling technique was employed for this study. Purposive
sampling technique was used in selecting the staff respondents in the local
government who are mainly from finance department and especially those that
have direct bearing with the revenue generation in the Local Government
Area. However, cluster sampling technique was used in selecting respondents,
base on the number of wards per each local government of the study. And
finally, community members were randomly selected taken into consideration
their occupations and sex category.

A simple random sampling (SRS) was employed in the selection of the sample
for this study. A sampling frame of each of the members comprises of staff of
both Ado-Odo, Ota Local Governments and community members (youths,
elders, groups, leaders, etc) will be developed by assigning a number to each
member of the three (2) groups.

3.5 Instruments of Data Collection

Both primary and secondary data will be collected and analyzed to test the
hypotheses already formulated in section one. However, both quantitative and
qualitative data would also be used for the study. The following are the
methods and instrument of data collection.

3.5.1 Primary Data

These are the first hand data to be used for the study which would be collected
through field work. Two basic instruments would be used for collecting the
primary data. These are:

i. Questionnaires: A carefully designed but wide-ranging questions

aimed at eliciting right responses was constructed and piloted in
order to detect any abnormalities or inherent problems. From the
comments and remarks from the pilot questionnaire respondents,
the entire questionnaire was reviewed and improved upon. While
some questions were open-ended, a few were Yes or No format.

3.5.2 Secondary Data

The study made use of secondary sources. These are second hand or ready-
made data collected, organized and presented by other researchers, agencies
and government organizations in the form of reports. This type of data is
critically important for examining the relationship between revenue and
Expenditure pattern and also to test our hypotheses. These data are available in
the library, Federal State and Local Government financial reports, project
documents and accounting books among others.

3.6 Administration of Questionnaire

The questionnaire was designed to capture detailed profile of the respondents
in addition to what they consider as the benefits and challenges facing the
revenue generation. The questionnaire was administered through the
employment of a research assistant that facilitated the process, while others
were self administered by the researcher to the respondents. All the sample
size (50 + 296) were given questionnaire. The number of questionnaires
administered and returned will be use for data analysis.

3.7 Method of Data Analysis

All the data collected will be organized, presented and analyzed using both
descriptive and inferential statistical tools. The opinion of our respondents are
presented in Tables, percentages and average would be used as descriptive
statistical tools, while Pearson‘s coefficient correlation analysis of SPSS 16.0
would be used to test hypotheses to determine the nature and strength of the
relationship between revenue generation and in the local government case
study. However, chi-square (x2) distribution would be employed as analytical
statistical tools to test whether effective management of revenue has positive
impact in the promotion of grass root in the Ado-Odo Local Government
Areas.

CHAPTER FOUR
DATA PRESENTATION AND ANALYSES

4.0 Introduction
Under this chapter, the various primary and secondary data collected will be
presented and analyzed using both descriptive and inferential statistical tools.
Tables and percentages would be used to present the data while spearman‘s
correlation and chi-square statistical test will be adopted to test the hypotheses
already formulated in chapter one. In the process of testing, the study has
employed Statistical Package for Social Sciences (SPSS) 16.0 and the results
are summarized in the subsequent sections of this chapter.

4.1 DETAILS OF REVENUE SOURCES OF ADO-ODO

LOCAL GOVERNMENT AREA OVER THE YEARS

Table 4.1: Revenues of Ado-Odo Local Government over the Years

Head Details 2007 2008 2009 2010 2011 2012 201

18,270,02 21,712,10 22,107,10 55,700,00 40,000,00 40,00

1002 Rates 0 0 0 0 40,000,000 0 0

Local 13,000,00 17480,00 21,858,30 15,000,00 13,90

1003 licence, fees 7,180,000 0 0 1 15,000,000 0 0
and fines

Earning from 30,850,00 30,430,00 49,300,00 12,610,00 35,60

1004 comm. 0 0 0 0 5,000,000 5,000,000 0
Undertaking

Rent on LG
1005 property 1,000,000 1,000,000 - - - - -

Interest 15,735,00
1006 Dividend and - 0 500,000 200,000 - - 500,0
Payment

24,000,00 24,000,00 24,000,00 36,000,00 36,000,00 36,00

1007 Grant 0 0 0 0 36,000,000 0 0
Reimbursem
ent

95,566,97 125,395,7 88,806,11 15,300,00 43,500,00 96,50

1008 Miscellaneous 9 76 0 0 18,000,000 0 5
 Statutory 1,193,918 2,144,812, 1,954,666 1,646,397, 2,053,066,8 3,278,305 3,249,
1009 Allocation ,990 061 ,790 878 12 ,120 54

GRAND 1770,785, 2,376,084, 2,156,880 2,163,066, 2,220,066,8 3,470,808 3,522,

TOTAL 969 837 ,000 179 12 ,158 76

Source: Extracted from Treasurer‘s Report, 2007 – 2013.

The above table shows the total revenue and details of the various revenue
sources over the years in Ado-Odo Local Government Area. The first column
shows the head code of the various revenue sources and the second column
shows the details of the various revenue sources. From the third to the ninth
column, it shows the revenue generated over the years under review. As could
be seen from the table, in 2007 the grand total revenue generated was
N1,770,785,969 and increase to N2,376,084,837, in 2008, it dropped to
N2,163,066,179 in 2009 and continued to rise to N2,220,066,812,
N3,470,808,158 and N3,522,200,767 in 2011, 2012 and 2013 respectively.

4.2 REVENUE ALLOCATION FOR EXPENDITURE PATTERN

Table 4.2: Expenditure (Expenditure pattern) in Education, Health, Agric, and Works
over the years

Sector 2007 2008 2009 2010 2011 2012 2013

Educatio
n 39,768,96344,832,19632,761,83156,152,732 58,316,81 76,811,833 71,318,266

Health 36,261,96845,311,631 33,116,11 37,000,83133,261,88151,831,111 70,899,631

Agric 43,216,83140,811,16739,831,44336,311,39639,211,76348,344,333 69,381,111

Works 39,754,10755,702,22255,120,43244,866,67952,831,32299,353,920 70,167,995

 159,754,10186,677,21160,829,81174,331,63183,621,77276,341,19 281,767,00
Total 7 6 7 8 7 7 3

Source: Source: Extracted from Treasurer‘s Report, 2007 – 2013.

The above table shows individual and total services delivered in monetary
terms from 2007 to 2013 in education, works, health and agriculture sector. In
2007, a total amount of N159,754,107 was spent while the amount increased
to N186,677,216 in 2008. The amount dropped to N160,829,817 in 2009.
From then, the amount continued to increased to N174,331,638;
N183,621,777; N276,341,197; and N281,767,003 in 2010, 2011,2012 and
2013 respectively.

Table 4.3: Total Revenue and Expenditure pattern over the years in Ado-
Odo Local Government Area

Year Grant total % change in Grand % change in

Grand total Expenditure Grand
expenditure

2007 1,770,969 - 159,001,869 -

2008 2,376,084,837 34.2 186,677,216 17.0

2009 2,156,880,000 -9.3 160,829,817 -14.0

2010 2,163,066,179 0.3 174,331,638 9.0

2011 2,220,066,812 2.6 183,621,777 5.2

2012 3,470,808,158 56.3 276,341,197 50.8

 2013 3,522,200,767 1.5 281,767,003 1.8

Source: Source: Extracted from Treasurer‘s Report, 2007 – 2013.

The above table shows an analysis of the increase/decrease on revenue
generated and the corresponding increase/decrease in Expenditure pattern. It
could be seen from the above table that 34.2% rate of increase was recorded
from 2007 to 2008. Between 2008 to 2009 there was 9.3% decrease. The
percentage increased to 0.3 between 2009 and 2010 and also increased to
2.6% from 2010 to 2011. There was significant increase of 56.3% in revenue
from 2011 to 2012.

Finally the amount increased from 2012 to 2013 by 1.5%.

On the other hand, a 17.0% increase in Expenditure pattern was recorded from
2007 to 2008. The level of Expenditure pattern decreased by 14.0% reflecting
the decrease in revenue generated in 2009. However, the level of Expenditure
pattern increased to 9.0% from 2009 to 2010. Also an increase of 5.2% was
recorded from 2010 to 2011. Also, there was significant increase in the level
of services delivered of 50.8% from 2011 to 2012. Finally, an increase of
1.8% was recorded from 2012 to 2013.
 4.3 DETAILS OF REVENUE SORUCES OF ADO-ODO
LOCAL GOVERNMENT AREA OVER THE YEARS

Table 4.4: Revenues of Ado-Odo Local Government over the years

Head Detail 2007 2008 2009 2010 2011 2012 2013

1001 Taxes 2,440,355 - - - - - -

1002 Rates 60,551,180 3,001,715 2,750,000 2,500,000 2,900,000 2,900,000 13,000,000

Local 14,467,00
1003 licence, - 3,881,115 5,712,500 4,062,300 5,467,000 0 24,042,604
fees and
fines

Earni fro
1004 ng m 5,307,805 2,618,285 1,799,411 1,931,000 2,675,000 2,675,000 13,000,000
Com
m.
Undertaki
ng

Rent on
1005 Local 3,309,300 800,600 539,804 - - - -
Governm
ent

Intere
1006 st on 1,096,930 500,000 500,000 500,000 - - 1,000,000
Divid
end

Grant 10,500,00 12,000,00 24,000,00 24,000,00

1007 s 500,000 0 12,000,000 0 0 0 24,000,000

1008 Miscellan 90,217,281 590,476,3 160,056,9519,125,00 56,917,50 73,693,81 34,050,000

 eous 81 2 0 0 1

Statut 1,481,442, 1,076,056, 1,578,589, 1,890,898 2,009,845, 2,545,409 2,781,342,

1009 ory 429 474 611 ,308 023 ,037 634
Allocatio
n

Grand 1,590,369, 1,687,834, 1,762,248, 1,931,016 2,101,804, 2,663,144 2,943,735,

Total 280 570 308 ,705 523 ,848 238

Source: Source: Extracted from Treasurer‘s Report, 2007 – 2013.

The above table shows total revenues of Ado-Odo local government over the
years. The first column shows the head code of the various revenue sources of
revenue of Ado-Odo Local Government Area. The second column shows the
details of various revenue sources.

4.4 RESPONSES OF LOCAL GOVERNMENT STAFF ON REVENUE

GENERATION

Table 4.5: The Availability of Several Revenue Generation Sources in

Ado-Odo Local Government Area

Options Frequency Percentage (%)

Strongly Agreed 7 25

Agreed 9 33
 Disagreed 4 14

Strongly disagreed 4 14

Undecided 4 14

Total 28 100

Source: Researcher‘s Survey, 2014.

The above table shows respondents‘ responses about the availability of several
revenue sources in Ado-Odo Local Government Area. Out of twenty eight
(28) respondents, seven (7) representing 25% strongly agreed that there were
various revenue generation sources; nine (9) equivalent to 33% agreed; four
(4) representing 14% disagreed; four (4) equivalent to 14% strongly disagreed;
and four (4) representing 14% were indecisive. From the above, it could be
realized that majority of the respondents (33%) agreed that there were
availability of several revenue generation sources in Ado-Odo Local
Government Area.
Table 4.6: the Availability of Several Revenue Generation Sources in
Ado-Odo Local Government Area

Options Frequency Percentage (%)

Strongly Agreed 2 11

Agreed 3 17

Disagreed 10 56

Strongly disagreed 2 11

Undecided 1 5

Total 18 100

Source: Researcher‘s Survey, 2014.

The above table shows respondents‘ responses about the general availability
of revenue generation sources in Ado-Odo Local Government Area. It shows
that out of eighteen (18) respondents, two (2) representing 11% strongly agree
that there are various revenue generation sources; three (3) equivalent to 17%
agreed; ten (10) equivalent to 56% disagreed; two (2) representing 11%
strongly disagreed; and one (1) representing 5% was indecisive. From the
above, it could be examined that majority of the respondents, (56%) disagreed
with the assertion.

Table 4.7: Availability of Several strategies for Revenue Generation in

Ado-Odo Local Government Area

Options Frequency Percentage (%)

Strongly Agreed 5 18

Agreed 3 11

Disagreed 10 35

Strongly disagreed 4 14

Undecided 6 22

Total 28 100

Source: Researcher‘s Survey, 2014.

Respondents in Ado-Odo Local Government Area were asked to determine

whether there were several strategies for revenue generation in Ado-Odo
Local Government Area. Out of twenty eight (28) respondents, five (5)
representing 18% strongly agreed; three (3) representing 11% agreed; ten (10)
equivalent to 35% disagreed; four (4) representing 14% strongly disagreed;
and six(6) equivalent to 22% were indecisive. From the above, it could be
examined that, majority of the respondents (35%) disagreed that there are
several strategies for revenue generation in Ado-Odo Local Government Area.

4.5 Major Findings

After various data were collected, presented and analysed, the following
findings were reached;

It was found that in the two Local Government Areas, the IGR was very low
compared to the external source. This has affected the level of revenue
generation and Expenditure pattern.

That effective management of local government revenue positively impacts on

the effort of local government in promoting development. This is evidenced in
the level of allocation given to capital expenditure that is meant for
Expenditure pattern. Generally there is a positive correlation between the
amount of revenue generated and the level of Expenditure pattern in Ado-Odo,
Ota Local Government Areas.

In comparative terms, the correlation coefficient of revenue generation and

Expenditure pattern was stronger in Ado-Odo Local Government Area (94%)
than in Ado-Odo Local Government Area (48%).

Public enlightenment campaign was the most effective way of encouraging tax
payers to pay tax in order to generate more revenue to deliver more services.
The result of the analysis also shows that the larger percentage of the revenue
received by the two local governments were in favour of recurrent
expenditure. And living smaller percentage to Expenditure pattern (capital
spending).

CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATIONS

5.0 INTRODUCTION

This chapter discusses the summary, conclusion and the necessary

recommendations.

5.1 SUMMARY

This research is conducted to examine the impact of revenue generation on

Expenditure pattern. The research is divided into six main chapters. Chapter
one is apparently introductory in nature which provides the basis upon which
the whole research is carried out. The chapter includes, among others, the
background to the study, statement of the problem, hypotheses, research
question, objectives of the study and significant of the study. Chapter two
reviews the various literature relevant to the study in terms of conceptual
issues, theoretical issues and empirical studies and the theoretical framework
of fiscal decentralization was adopted as the foundation upon which the study
was based. Chapter three deals with the methodology of the study whereby the
various research design and methods of data collection were discussed. Not
only that, the methods of data analysis and population, sample size and
sampling techniques were also highlighted. Chapter four was on data
presentation and analyses whereby all the data collected from the survey and
that obtained from the secondary sources were summarised, organised,
presented and analysed using both descriptive and statistical tools. All the
hypotheses formulated were tested under this chapter. Chapter five which was
the concluding chapter dealt with summary, conclusion and recommendations.
The chapter summarised the whole work and conclusions were drawn while
recommendations were made on how to improve local government revenue
generation in order to provide more services.

5.2 CONCLUSION

Based on the data collected, presented and analysed and the result of statistical
tests, the following conclusions are discernable:

That service provisions by local government is the product of the ability to

generate revenue. Therefore, based on this, the higher the revenue the higher
the number/quantity of services provided and vice versa;

That commercial/economic activities are great determinants of local

government revenue and subsequently service provision. This is based on the
comparative data analysis where results have shown that Ado-Odo local
government revenue generation capacity has more impact on service
provisions than Ado-Odo local government. It is therefore concluded that, this
is as a result of the growing level of economic/commercial activities in Ado-
Odo Local Government Area that are not much available in Ado-Odo Local
Government Area.

That effective management of generated revenue is also a fundamental issue in

the provision of services to the local populace. Therefore, revenue generation
is not an end in itself in determining service provision, but proper utilisation is
also a great determinant.

5.3 RECOMMENDATIONS

Having summarised and concluded the work, the following recommendations

among others would serve as ways through which local government revenue
generation should be boosted in order to improve the level of Expenditure
pattern to the local citizenry.

(1) Having established that the more the revenue generated the more
services are provided to the citizenry, more revenue sources should
be identified and adopted in order to increase and improve the
revenue base of the local governments. The present revenue
sources should also be fully tapped to improve the revenue base of
the local government. Here, it is strongly recommended that the
local government should adequately be involved in commercial
transportation. By this, it means that commercial vehicles (cars,
buses and trailers) should be purchased and operate, not on a
subsidised bases but purely on commercial bases i.e. profit
maximisation. However, this commercial vehicles should not be
managed by any official or any department of the local
government council, but a management consult be given to
manage. For example, Afribank, and other transport consults on
contract management basis. This will undoubtedly improve the
revenues of the Local Government Areas under study.

(2) Diversification of income sources should be made in the two local

government under study. However, Ado-Odo local government
should be more diversified since our findings revealed that
 SabonGari local government has more revenue sources than
Kudun local government perhaps due to the fact that the former is
having more commercial and economic activities than the latter.
This diversification could be done even in terms of agriculture in
addition to the commercial undertakings. For Ado-Odo to be
diversified, sound policies should be made that can attract
investors especially with regards to commercial farming and food
processing through cottage industries and more specifically selling
plot at subsidised price to only those who would want to establish
food processing factory and commercial farms. A tax leave should
be given to these factories for a period of 10 years of start-up of
operation.

(3) In order to ensure that taxpayers pay their taxes as at when due, a
public enlightenment campaign should regularly be organised
explaining the importance of paying tax not only for revenue
generation but also for Expenditure pattern. There has always been
reciprocity between tax payers and the government (Local
Government). Tax payers refusal to pay local taxes was as a result
of poor services or lack of services rendered by local governments.
The higher the services, the higher the taxes and vice versa.

(4) Efforts should be enhanced by the local government towards

generation of internal revenue so as to meet the yearnings and
aspiration of the people at grassroot level.
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